Legal alert no. 52

On February 9th, 2018, it was published, in the Portuguese Official Gazette, Law 3/2018 which establishes the sanctions regime applicable to the performance of crowdfunding activities and amends, for the first time, Law 102/2015, of 24 August, which approved the crowdfunding legal regime.

In line with what has already been set forth in Law 102/2015, CMVM is the competent authority to exercise, in relation to the equity and debt crowdfunding activity, all powers granted by law, notably, the powers to investigate infractions, to lead the preparation of the misdemeanor procedure and to apply penalties and ancillary fines under such activity.

In turn, in relation to rewards and donation-based crowdfunding, the supervision, the preparation of the misdemeanor procedure and the application of penalties and ancillary fines is granted to the Authority for Economic and Food Safety (“ASAE”).

Considering the types of administrative offences foreseen in the newly approved Law, related to the activity of equity and debt crowdfunding, we highlight that:

The severe administrative offences may give rise to the payment of a penalty between€ 5.000,00 to € 1.000.000,00;

As an example, it is considered as severe administrative offence the performance of crowdfunding acts or activities without the respective registry with the CMVM, or falling outside the scope of the registry, when applicable;

The serious administrative offences may give rise to the payment of a penalty between € 2.500,00 to € 500.000,00;

As an example, the breach of the rules on provision of information, confidentiality of the information received by the management entities of electronic platforms or the communication or provision of information to CMVM are considered serious administrative offences;

The minor administrative offences may give rise to the payment of a penalty between € 1.000,00 to € 200.000,00;

As an example, the breach of advertising rules applicable to offers is considered a minor administrative offence;

It is foreseen, however, that if the triple of the economic benefit exceeds the limit of the applicable penalty, this limit will be increased to such value;

In addition to the penalties, it may be applied, further to those foreseen in the general framework for administrative offences, several ancillary fines established in the Law now approved, notably, the disqualification from the practice of administration, management, direction and supervision functions in entities subject to the supervision of CMVM, the discharge of the registry necessary for the performance of crowdfunding activities, among others;

In case of severe and serious administrative offences, the attempt to commit an offense is punishable.

Considering the types of administrative offences related to the rewards and donation-based crowdfunding, we highlight that:

The severe administrative offences may give rise to the payment of a penalty between € 1.500,00 to € 3.750,00, in case of a natural person, and € 5.000,00 to € 44.000,00, in case of a legal person;

As an example, it is considered a very serious administrative offence the performance of crowdfunding acts or activities without the communication of the beginning of the platform’s activity to be submitted to the General Directorate for Economic Activities, or falling outside the scope of the communication, as well as, the breach of the maximum threshold approved for the solicitation;

The serious administrative offences may give rise to the payment of a penalty between € 750,00 to € 2.500,00, in case of natural person, and between € 2.500,00 to € 16.000,00, in case of legal person;

As an example, it is considered as serious administrative offences the breaches of the provision of information regimes related to offers, the the regime of confidentiality of the information received by the management entities of electronic crowdfunding platforms, the regime of written form and disclosure of the adhesion agreements to electronic platforms, among others;

Minor administrative offences may give rise to the payment of a penalty between € 300,00 to € 1.000,00, in case of natural person, and between € 1.200,00 to € 8.000,00, in case of legal person;

As an example, it is considered a minor administrative offence the breach of the advertising regime applicable to offers;

It is also foreseen that the attempt to commit an offense is punishable by law, regardless the type of administrative offence, with the penalty applicable to the committed administrative offence being considerably reduced;

In addition to the penalties, it may also be applied, further to those foreseen in the general regime for administrative offences, the ancillary fines established in the newly approved Law, notably, the temporary prohibition to carry out the profession or activity to which the administrative offence refers to, up to two years from the final enforceable decision;

The revenue of the penalties goes (i) 60% to the State; (ii) 40% to ASAE.

CTSU - Sociedade de Advogados, SP, RL, SA is an independent law firm member of Deloitte Legal network, with offices in Portugal. “Deloitte Legal” means the legal practices of Deloitte Touche Tohmatsu Limited member firms or their affiliates that provide legal services. For legal and regulatory reasons, not all member firms provide legal services.